Decentralization of National Transfer Programs: compliance, local revealed equivalence scales, and efficacy of aid

Numerous national transfer programs around the world are designed with uniform benefit schedules imposed by central governments, but implemented by local governments. The Productive Safety Net Program (PSNP) in Ethiopia, the second largest safety net in Sub Saharan Africa, is one such program. First, using variance decomposition techniques, we document local government’s noncompliance to the federally mandated uniform benefit schedule. Second, we find that local governments account for household economies of scale on the intensive margin (actual payouts to households) rather than the extensive margin (which households are selected into the PSNP). Younger children receive lower payments than older children or adults. Lastly, we examine whether noncompliance with federal mandates is more or less poverty reducing than the program would have been under the federally mandated uniform benefit schedule.